Securing the funds needed to make home improvements or even clear outstanding debts, is never a clear-cut thing. Applicants seeking personal loans with bad credit need to convince lenders they will get their money back. But the good news is there are steps to take that can greatly strengthen a loan application.
The truth is that bad credit scores are never enough to ruin the chances of getting approval. Of far greater influence is the overall affordability of a loan, which relates to the income and amount of existing debt an applicant has. Of course, no lender is prepared to offer guaranteed loan approval, but as long as the criteria are met, it can be difficult not to give the green light.
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So what are the steps to take to improve the chances of having a personal loan approved? We point out three of them, each of which adds a particular strength to your application.
1. Understand Your Credit Status
The first step is to learn your own credit status, and know how the credit score was calculated. When seeking a personal loan with bad credit, it is very useful to know why the application is weak, so that the necessary measures can be taken to strengthen it. Since a credit score dictates the interest rate charged, improving the score can make a loan more affordable.
Of course, this is still some way off getting a guaranteed loan approval, but if outstanding utility bills or late loan repayments are finally paid, the credit score will improve and approval become closer to being achieved.
If significant debt improvement is required, a modest consolidation loan can be taken out to clear the debts and lower the overall monthly repayments. Alternatively, some small personal loans might be taken out to clear individual debts, one at a time. Known as payday loans, these are very expensive with very high interest rates.
2. Choose Your Lender Carefully
It is never a good idea to jump at the first loan deal that is offered. Securing a good personal loan with bad credit depends on the specific terms of the loan. And since it is the lender that sets the small print, where penalties and late fees policies are detailed, choosing the lender is a key factor too.
Lenders are found either amongst the traditional lending institutions, like banks, or amongst the online lenders operating over the Internet. Online lenders are known to charge the lowest interest rates, and offer the most flexible repayment structures. They also offer no credit check loans, which is the closest anyone can get to offer guaranteed loan approval.
However, there are still basic criteria to meet, relating to age (over 18), residency status (US citizen) and employment status (reliable source of income). Be sure to check out the reputation of any online lender before committing to a personal loan deal by checking them out on the BBB website.
3. Consider Getting Securities
Finally, offering security is hugely beneficial when applying for a personal loan with bad credit. There are two kinds to get: either collateral or a cosigner. With unsecured loans, the lender can only look to the income of the applicant, but when security is provided they have recourse should the borrower default on the loan.
Finding anything that can be used as collateral can be tricky, as the value must at least match the value of the loan. This usually restricts the loans to a relatively small amount $1,000 to $10,000.
Of far greater interest to lenders is a cosigner, who promises to make repayments when the borrower is unable to. And with repayments guaranteed, loan approval is very likely. However, a cosigner must have an excellent credit score before they can be considered acceptable as part of a personal loan application.
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